What to know when a loved one passes
Dealing with the death of a loved one can be difficult enough without the additional responsibilities of settling the deceased's estate, particularly when it comes to bills, taxes, and other outstanding debt.
Legal requirements regarding a decedent's expenses can vary widely state by state, so if you are handling a loved one's estate, be sure to consult with an attorney. Here are some important factors to keep in mind.
- The deceased's estate will be liable for expenses. Assets in the deceased's estate must be used to pay off outstanding debts, including federal and applicable state and local income taxes. The priority in which these bills must be paid is usually determined at the state level. Once debts are settled, any remaining assets can then be divided among the beneficiaries.
- Funeral expenses are considered a priority obligation — and may be reimbursable. Family members and/or friends who pay out of pocket to help cover "reasonable" funeral expenses can be reimbursed from the estate, assuming the estate has the assets to cover the costs. Funeral costs usually are given priority status over other creditors, but the rules can vary from state to state.
- Beware of debt collectors. For the most part, a deceased person's debts do not automatically transfer to a spouse, child, or other family member. Unscrupulous collection agencies will often try to convince family members that they are responsible for a loved one's bills. Unless you have co-signed a loan or are named on a joint account that is in arrears (such as a credit card account), do not be coerced into settling. Surviving spouses should be sure to consult with an attorney, particularly if they reside in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). If you are being hounded by collection agencies, refer them to your attorney or to the executor of the estate. If the agencies continue to call, you can file a complaint with the Federal Trade Commission.
- Some accounts are exempt from creditors. Assets held in certain types of accounts, such as irrevocable trusts, insurance policies, and retirement accounts, are typically excluded from the deceased's estate and pass directly to the beneficiaries.
- Mortgage debt transfers to the new owner. If a beneficiary inherits property — such as a residence — that beneficiary is typically responsible for any outstanding liens on the property, including a mortgage. If the deceased had a reverse mortgage and the home is sold or transferred to a nonspouse beneficiary, the borrowed amount must be repaid to the lender. Note that the amount due cannot exceed the home's current appraised value.
This communication is not intended to be legal or tax advice and should not be treated as such. Each individual's situation is different. You should contact your legal and/or tax professional to discuss your personal situation.
© SS&C. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.
The material was authored by a third party, DST Retirement Solutions, LLC, an SS&C company ("SS&C"), not affiliated with Merrill or any of its affiliates and is for information and educational purposes only. The opinions and views expressed do not necessarily reflect the opinions and views of Merrill or any of its affiliates. Any assumptions, opinions and estimates are as of the date of this material and are subject to change without notice. Past performance does not guarantee future results. The information contained in this material does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security, financial instrument, or strategy. Before acting on any recommendation in this material, you should consider whether it is in your best interest based on your particular circumstances and, if necessary, seek professional advice.
Because of the possibility of human or mechanical error by SS&C or its sources, neither SS&C nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall SS&C be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.
Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.
MAP6376715-08092025